The Pound, which reached $1.3228 against the US dollar this morning, its highest level since late March, began its decent as Brits took to the polls, dipping below 1.32 or 0.2 percent against the USD.
— Karel Mercx (@KarelMercx) December 12, 2019
Paul Donovan, UBS Wealth Management chief economis, said the pound would remain volatile as the outcome remained uncertain.
He told the Financial Times: "These markets are plutocratic. UK voting is democratic. There are lots of uncertainties. The only certainty is that the Brexit process will remain interminably tedious, one way or another.
Garry Young, former Bank of England and Treasury official at the National Institute of Economic and Social Research, said that the pound's temporary appreciation was due to plans to increase government spending, including that of Labour.
“This is because it adds to spending in the economy and puts upward pressure on interest rates. This attracts capital inflows and drives up the value of the currency," Young said.
"So I think part of the reason for sterling’s appreciation is an expectation of fiscal expansion whatever the outcome of the election," he added.
Market Volatility Indexes Shaken Up On Election Day
The news comes after market volatility had skyrocketed 6 percent, its highest level since September 2016, with investors buying derivative contracts to cushion their investments froma fall in the pound, Reuters reported on Thursday.
Overnight implied volatility jumped 45 percent, the country's highest since the 23 June 2016 EU Referendum.
Ugo Lancioni, head of global currency at Neuberger Berman, said: “The immediate price action in sterling will obviously be driven by the election outcome, but the magnitude of the majority will also be important.
Brits across the UK's 650 constituencies will vote from 07:00 to 22:00 on Thursday in a bid to break to break the political impasse on Brexit which has paralysed the country after the 23 June 2016 EU Referendum.
The 12 December general election has been widely reported as the most important election cycle in a generation, which will see UK prime minister Boris Johnson and Labour and opposition leader Jeremy Corbyn contending for No 10 to tackle the country's Brexit and political uncertainties.
Commons triggered snap elections on 27 October after a three-year deadlock and a further three-month delay to Brexit until 31 January 2020, which was approved by the European Union.